Friday, April 8, 2011

DB/DC, REITs & Youtube

Leo Kolivakis is a voracious reader and passionate writer.  He is an independent analyst based in Montreal whose opinions on matters relating to retirement savings and pension plans are highly valued.  Leo and I met a few years back via our blogs.  His is called Pension Pulse It’d be worth your while to check it out as, in addition to his regular commentary, his blog home page offers a plethora of links, as Leo puts it “This blog is a one stop center for information and insight pertaining to pension funds and financial markets. It is intended for a wide audience, including plan sponsors, pension fund managers, board of directors, government supervisors, financial reporters, individual investors and most importantly pension plan beneficiaries who want to understand where their contributions are being invested and how their pension plans are being managed.
What follow are some excerpts from his post yesterday:

  • Financial officers are increasingly switching private sector pensions from defined-benefit to defined contribution plans, even with the economy on the upswing, according to a study released Wednesday.  "The 2008 crisis may have been the final straw for senior finance officers", said a representative of the consultant, Towers Watson.
  • "While plan sponsors may not be able to afford to make changes right now, many are working on strategies to de-risk or even exit when the financial position of their plans improve."
·        For purpose of definitions:  Defined-contribution plans pay out on retirement according to the investment’s performance, while defined-benefit plans promise a set monthly amount calculated according to a retiree’s average salary and years of work. Defined-contribution plans tend to be less risky for employers, but depend on the worker’s ability to manage his or her own investment portfolio.

·      “We have our work cut out for us to try to deliver a better return on assets than market value,” said the CEO and CIO of one of Canada’s largest public pension funds.  He said pension fund returns have been “barely positive” over the past 10 years and doesn’t expect much better over the next five, adding Canadian pensions will be more difficult to fund as they come to maturity in the near future.  “60 is the new 40,” the CEO/CIO joked but was serious when he urged a discussion of public policy to address the fact that Canadians no longer follow the traditional path of graduating from school, getting a job, contributing to a pension and retiring at age 65.

In one of his recent posts, Leo wrote the following:  “Now, getting back to the topic of Canadian companies fleeing DB plans. As I wrote in my last comment, I believe that most Canadian companies shouldn't be in the defined benefit pension business at all. Instead, companies should transfer this risk to existing and new public sector pension plans and have professional pension fund managers manage these retirement funds.  Most Canadian companies have terrible DB plans, which are severely underfunded. It's hardly surprising to see them opt out of DB plans and switch over to DC plans, placing the retirement onus entirely on employees. This is why I believe we should scrap private DB plans altogether, and create new public DB plans to manage these assets.  Again, I believe companies should worry about their business, not pensions. We have some of the world's best pension fund managers in Canada who can worry about pensions. Employees need to have the peace of mind that comes with a well-managed DB plan. Period, end of story. The trend of switching over to a DC plan will only ensure more pension poverty down the road. It's high time Canada takes the lead in crafting better pension policies, ensuring more people retire with dignity."

This is pretty heady stuff.  But, it’s real and it is a similar story in the U.S.  People should be able to retire with dignity but we’ve become an entitled bunch. It’s how we’ve grown up and it may just be that we all have to start taking more responsibility for our own financial futures (I wish I had thought of that twenty years ago!).  The world has changed and continues to change around us.  And even with as many Peter Pan genes as I have, there’ll be a time, “Further on up the road” when I’ll be dealing with this kind of stuff too.  (BTW:  This version of “Further on up the Road”, written by Joe Medwich Veasey and Don D. Robey brings together two guitar gods:  Jeff Beck and Eric Clapton.  You will like it.

Last night, I met a young real estate journalist for the first time.  He found me through this column.  We had a hamburger at The Burger Joint inside Le Parker Meredien Hotel in New York.  I’d never heard of it but he’s a huge burger fan and scours the world for ‘the best burger.’  This is a true hole-in-the-wall and a classic New York place.  The burger was real good and it’s worth a visit just to experience the scene.  Anyway, he’s been covering commercial real estate, actually REITs, for less than a year and yesterday, along with a couple of hundred others, he attended the 16th annual REIT symposium hosted by New York University’s Schack Institute of Real Estate.  He asked me a simple but poignant question:  “From what I heard today, it seems like things are getting better in the commercial real estate business.  Is that true?”  Well, I had my answer for him, given with my usual disclaimer, “I don’t know if I’m right or wrong but here’s my best shot.”  What are your thoughts?

A couple of weeks ago I wrote about starting to implement some of the organizational tools from a book called “Getting Things Done.”  I am here to report that simply the stuff I have done regarding managing my “Inbox” is working…just as advertised!

Final note:  For as long as I can remember, on the best of nights, I've slept six hours.  It seems like the right number of hours for me even though all the reports say that you your body needs at least eight hours…. Hey, that’s one-third of your life!  Anyway, very early this morning when I wrote this column I went on to Youtube to find “Further on up the Road” mentioned above.  Youtube is one of the greatest inventions of our time, especially if you’re into music.  It gives you the chance to follow your heart by ‘stream of consciousness’ surfing.  So, just an example of where things led me:
Cause We’ve Ended As Lovers’; Somewhere Over The Rainbow(one of my favorite songs ever) and can be heard over the closing credits of the movie,  Finding Forrester; 'Time Has Come Today'…a crowd favorite of the band I was in ‘in the day’, Everyone;  and a couple of others from early Everyone set lists:  Groovin’ is Easy; 1982 A. I could go on and on but, enough for one morning.

Final thought:  Over the years, as I've either said or heard a phrase, I'd say, "Hey, that would be a good name for a band."  Well, it's been many years since there were taboos of sorts on band names and on lots of things for that matter.  So today, in the spirit of freedom of speech I share with you some of the names of bands playing in New York this weekend.  The Black Lips, The Dead Milkmen, The Go! Team, Handsome Furs, The Hold Steady, Joan as Police Woman, Mr. Dream, Old 97's, TV on the Radio. 

Due to something coming up at the last minute, I had to cancel my trip to the Villanova Real Estate Challenge, which is happening today.  I’ll get a report on it and share it with you next week. 

On the road....

Apr. 13-15: Venice, Italy to attend the INREV Annual General Meeting.

Apr. 20-29:  New York

May 1-4:  San Diego to attend the CRE (Counselors of Real Estate) Conference

May 9-10:  New York

May 12-14: North Palm Beach, FL for the annual meeting of the Homer Hoyt Fellows.

May 16-17: New York

May 22-25:  Miami Beach, FL to attend the NCPERS (National Council of Public Employees Retirement Systems) Conference.

June 6-10: London to moderate a panel at the PERE Forum-Europe.

Photo: Too many of me.  Public space in Le Parker Meredien Hotel, New York.

These are my views and not that of my employer. 


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